Deutsche Telekom AG and Orange SA on Wednesday confirmed they are in talks to sell their U.K. cellular venture EE Ltd. to BT Group plc, which is weighing a purchase of a domestic cellular company about a decade after selling its own wireless network to Telefónica SA.
"Deutsche Telekom and Orange are having highly preliminary exploratory discussions with British Telecom, although it is too early to state whether any transaction may occur," the companies said.
BT, the former U.K. monopoly phone company, Monday said it was considering such a purchase and confirmed it was in talks to buy back its network – now doing business as O2 – from Telefónica. The London-based suitor said it was also in talks with another, unknown company with speculation correctly focusing on EE.
European telecoms are scrambling to offer customers quad-play services — broadband, entertainment content and fixed-line and wireless phone services — sparking widespread consolidation. BT is already the U.K.'s biggest broadband provider because of its history as the legacy phone company and will soon begin reselling cellular services from EE to offer quad play.
Buying EE would make BT the U.K.'s No. 1 cellular network operator with 27 million customers. O2 has 23 million. Analysts have said a purchase of either would cost about £9 billion ($14.2 billion) but have said almost unanimously that such a deal would make sense.
Investors appear to agree: the shares gained 3.1%, or 12.20 pence, to 408 pence ($0.64) in afternoon London trading. Telekom gained 1.4%, or €0.18, to €13.46 ($16.76) in Frankfurt while Orange slid less than 1%, or €0.085, to €13.745 in Paris.